2 Thoughts on Charitable Giving this Week:  

 

1.  As we end 2022, many of our clients will consider charitable contributions as part of making tax-efficient end-of-year decisions to increase deductions. However, not every charity is the same. This week, I’ve included an article with tips for vetting charities before you donate to them. https://consumer.ftc.gov/articles/giving-charity

2.  I love Donor Advised Funds as a vehicle for tax-efficient charitable giving. Here’s a closer look at some of the big advantages they offer:

• • • • Flexible Timing: Using a donor-advised fund allows you to decouple timing decisions for donations and gifts. Donations from the fund to charities can be made over time and at your discretion. For example, say you are in your peak earning years and paying high taxes, you can donate now, take the tax deduction, and wait to make the gift to the charity until later in your life, or even at the time of your death. 

• • • • Tax-Deductible Donations: Gifts to a donor-advised fund are irrevocable, meaning you can’t change your mind and reclaim the assets after a donation is made. However, they are deductible in the tax year in which you make the gift.
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  • • • Tax-Free Growth: Assets in a donor-advised fund can be invested and are not subject to taxes as they grow or at the time of distribution. This tax protection may make a donor-advised fund a more efficient location for assets than a taxable brokerage account, as the tax advantages can help you maximize growth and the impact of your gifts.
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  • • • Donation Options: You can contribute cash to donor-advised funds, but also to many kinds of appreciated assets, including stocks, mutual funds, cryptocurrency, and certain complex assets, without incurring capital gains taxes. Not all charities are set up to accept gifts of this kind. Appreciated assets can be donated to a donor-advised fund, liquidated without triggering taxes, and the proceeds can then be given away. 

• • • • Estate Planning: Donor-advised funds also provide a mechanism to remove assets from your taxable estate, which for some people may lower the tax cost for their beneficiaries. Upon your death, your beneficiaries can continue to direct charitable gifts from the account, or the remaining assets can be paid out to your chosen charity.

Important Considerations:

If you are facing high taxes, estate planning issues, or planning to make charitable giving a part of your financial life, then donor-advised funds can be a useful option with tax advantages and flexibility. Making the most of these funds requires careful planning, especially since gifts are irrevocable. Timing of contributions can have major tax implications, and not all donor-advised funds offer the same costs or services. A financial advisor can help you make the most of these accounts and incorporate a giving strategy into your overall financial plan.

SOURCES:

https://www.irs.gov/charities-non-profits/charitable-organizations/donor-advised-funds

 

 

 

 

 

 

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete.  It is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation.  Any opinions are those of Jay Wheeler and not necessarily those of Raymond James.   Links are being provided for information purposes only.  Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.  Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.  Donors are urged to consult their attorneys, accountants, or tax advisors with respect to questions related to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes.  To learn more about the potential risks and benefits of Donor Advised Funds, please contact us.  Raymond James and its advisors do not offer tax or legal advice.  You should discuss any tax or legal matters with the appropriate professional.